The markets continued to struggle last week and supply-side fundamentals don’t look so good on the horizon.
“The grim reality of limited fed cattle shackle space for the next four months is beginning to take a toll, especially on cash cattle prices,” commented Cassie Fish of the Beef Report last Thursday.
That toll was felt when the negotiated cash fed cattle trade came in at $100-107 (average $100.84) live and $160-169 ($164.52) dressed last week. With just over 59,200 head confirmed sold as of Thursday afternoon, and most of that trade having happened on Thursday, the market was set.
“A violation of cash support at $102 basis W KS establishes $98 as the next cash support level,” projected Andrew Gottschalk of Hedgers Edge.
Shackle space wasn’t the only thing limiting production. Last week’s holiday-shortened kill week also meant fewer fed cattle processed.
“Packers were successful in picking up the slack for the loss of Finney County in August, with 522k, 521k, and 524k head fed kills posted after the fire. But the limitations of older plants and a different workforce than 2003, which is the last time capacity utilization was this high, has become evident this week. There have been a variety of plant level issues surface which will end up curtailing this week’s slaughter by as much as 15,000 head.”
The fundamentals on the supply-side outlook are not all that encouraging either.
“Carcass weights are expected to trend above year ago levels during the fourth quarter,” noted Gottschalk.
“Lower than expected August marketings resulted in front-end fed cattle supplies projecting to remain above year ago levels through the balance of this year. We expect Y/Y declines to be realized post-New Year. The latter is the result of four consecutive months of lower Y/Y feedyard placements. It is imperative that producers maintain an aggressive selling posture to prevent a buildup in front-end fed cattle supplies that could potentially carry into the New Year.”
Futures last week came out of their recovery efforts mixed. Live cattle futures failed and lost about $1 over the course of the week with settlements of $97.88 for October and $102.23 for December. Feeders were successful on the other hand, gaining about $2 with September settling at $134.40 and October settling at $132.33.
Despite the week-to-week movements, Thursday saw all of the contracts losing ground to technical pressures according to DTN’s Rick Kment.
“Sharp losses quickly developed in live cattle and feeder cattle futures as nearby live cattle futures broke through support levels, sparking technical pressure,” he said Thursday afternoon.
Cash feeder cattle auctions were similarly mixed. The surveyed auctions saw sales volumes both halved and doubled, and prices both up and down on their feeder cattle offering. Medium and large #1 steers weighing between 700-800 lbs. saw average prices retrench into the lower $140s at best, with steep discounts on unweaned calves where comparable sales were available.
Colorado: The monthly Centennial Livestock dairy feeder sale saw just over 1,600 head of dairy-bred feeder cattle. Steers, which made up 95 percent of the offering, were mostly $5-8 lower across all weights and dairy heifers were too lightly tested for a market trend. A small lot of large #3 steers weighing 709 lbs. averaged $86 while some 5-weight large #2 steers averaged $124.
Iowa: The Russell Livestock auction held its first sale in a while last week, meaning there were no market trends offered. Trade was called active on very good demand on the total feeder cattle offering. Benchmark steers sold between $142-152.50.
Kansas: The Farmers and Ranchers Livestock Commission sold about half the volume last week compared to what it sold the week before. Steers over 800 lbs. sold down $3-6, while lighter steers were lightly traded with a lower undertone noted. Heifers were called steady to $6 lower on comparable sales. Number 1, 7-weight steers sold between $140-148.75, except for a small lot of unweaned calves that averaged $137.
Missouri: The opposite issue happened at the Joplin Regional Stockyards last week, where the sale volume doubled, and feeder calves traded steady to $3 higher. Yearling feeders were called steady. Two lots of #1, 7-weight yearling steers sold at averages of $143.57 for the 747-lb. lot, and $145 for the 783-lb. lot.
Nebraska: The Ogallala Livestock Auction held its first sale in a few weeks, meaning there were no market trend comparisons. Demand was called good to moderate on the 2,370-head sale offering. The offering was all feeders, majority heifers, and 95 percent over 600 lbs. Two lots on benchmark steers sold between $138.50-143.50.
New Mexico: Sale volumes were down, but prices were up, at the Clovis Livestock Auction last week. Only 1,413 head of feeders sold (down from 1,809 head), but prices on most classes of feeders were steady at worst. Steers under 600 lbs. were called up $4-6, with instances of up $10 on 3-weights. Heavier steers were steady. Heifers under 600 lbs. were up $2 while heavier heifers were down $1-2. Trade was called active on good demand. One 8-head lot of 701-lb. #1 steers averaged $128.25. In #1, 6-weight steers, unweaned calves saw a $5-10 discount to yearlings.
Oklahoma: The sale volume at the OKC West-El Reno sale was down considerably last week at not even 4,300 head. Where comparable, feeders were called $1-3 lower on moderate demand. Two lots of benchmark yearling steers sold with prices ranging from $136.75-144.25.
Wyoming: The Winter Livestock Auction of Riverton sold many times more feeder cattle last week than it did at the prior sale, meaning there were too few comparable sales for a market trend. Nonetheless, there was a lower undertone noted on the majority heifer feeder offering. Two large lots of #1, 7-weight yearling steers both averaged just under $138. — Kerry Halladay, WLJ editor